Does Slow & Steady Win the Race? Residential Housing in 2014

Does Slow & Steady Win the Race?

Residential Housing in 2014Dr. Jim Gilkeson, CFA

CFA Society of OrlandoFebruary 27, 2014

Jim Gilkeson, PhD, CFA 2

2005: Is the Sky Falling? 2007: What a Difference a Year Makes 2008: Where Do We Go From Here? 2009: Reading the Tea Leaves 2010: The Good, the Bad, and the Ugly 2012: Have We Hit Bottom? 2013: (Very) Cautious Optimism 2014: Will Slow & Steady Win the

Race?

2/27/2014

Where We’ve Been


Price Volume (Sales) Delinquency/Foreclosure Financing Supply Demand Scorecard

2/27/2014

What We’ll Talk About Today


1998 2001 2004 2007 2010 2013150.0

170.0

190.0

210.0

230.0

250.0

270.0

290.0

310.0

330.0

U.S. U.S. (cq) South South (cq)

2/27/2014

Prices (actual & constant quality)


Home Prices

New homes Existing homes1998 2001 2004 2007 2010 2013

100.0

120.0

140.0

160.0

180.0

200.0

220.0

240.0

260.0

280.0

300.0

U.S.South

1998 2001 2004 2007 2010 2013100.0

120.0

140.0

160.0

180.0

200.0

220.0

240.0

260.0

280.0

300.0

U.S.South

2/27/2014


1998 2001 2004 2007 2010 201350

100

150

200

250

FHFA Purchase-Only Case-Shiller

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Repeat Sales Indices


2001 2003 2005 2007 2009 2011 2013100

150

200

250

300

350

US FL Orlando

2/27/2014

FHFA (all): US, FL, Orlando

Jim Gilkeson, PhD, CFA 82/27/2014

Florida Price AppreciationMSA 1-year 5-yearWest Palm Beach 12.95% -12.18%

Miami 12.59% -17.24%

Punta Gorda 12.08% -13.70%

Ft Myers 11.55% -5.84%

Sarasota 10.88% -11.05%

Orlando 10.61% -25.05%

Ft Lauderdale 10.43% -12.16%

Port St. Lucie 9.04% -17.21%

Tampa/St. Pete 8.41% -17.48%

Naples 8.34% -14.31%

Palm Bay 6.60% -20.99%

Daytona 6.26% -24.08%

Jacksonville 5.98% -21.69%

Lakeland 5.57% -30.15%

Ft Walton 4.65% -14.63%

Pensacola 4.22% -12.85%

Tallahassee 3.73% -20.79%

Ocala 3.64% -31.86%

Gainesville 1.92% -24.40%


Sales Volume (US)

1998 2001 2004 2007 2010 20130

1000

2000

3000

4000

5000

6000

7000

8000

0

200

400

600

800

1000

1200

1400

existingnew


Sales Volume (local)

1998 2001 2004 2007 2010 20130

5

10

15

20

25

30

35

40

0

50000

100000

150000

200000

250000

Orlando MSA FL

thou

sand

s of

uni

ts


2001 2004 2007 2010 20130

50,000

100,000

150,000

200,000

250,000

300,000

0

5000

10000

15000

20000

25000

30000

35000

Volume Median Price

med

ian

pric

e

volu

me

2/27/2014

Orlando Sales and Prices


1998 2001 2004 2001 2010 20130

2

4

6

8

10

12

Charge Offs Delinquencies

Rate

(%)

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Bank Problem Loans


2008 2009 2010 2011 2012 20130

1

2

3

4

5

6

7

8

Seriously Delinquent Foreclosure

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Mortgage Deliquencies (US)


Foreclosures


Seriously Delinquent (MSA) Serious 90+ Days ForeclosureVineland-Millville-Bridgeton, NJ 24.47% 8.46% 16.01%Atlantic City-Hammonton, NJ 17.81% 5.82% 11.99%Kingston, NY 17.05% 5.26% 11.79%Miami-Fort Lauderdale-Pompano Beach, FL 15.80% 4.18% 11.62%Poughkeepsie-Newburgh-Middletown, NY 15.67% 4.95% 10.72%Tampa-St. Petersburg-Clearwater, FL 14.80% 3.94% 10.86%Deltona-Daytona Beach-Ormond Beach, FL 14.40% 3.98% 10.43%Glens Falls, NY 14.24% 4.90% 9.34%Lakeland-Winter Haven, FL 14.04% 4.30% 9.74%Orlando-Kissimmee, FL 13.92% 3.97% 9.95%Pine Bluff, AR 13.81% 5.67% 8.13%Las Vegas-Paradise, NV 13.68% 5.74% 7.94%Mobile, AL 13.42% 6.00% 7.43%Memphis, TN-MS-AR 13.40% 6.46% 6.94%Jacksonville, FL 13.16% 4.57% 8.59%Port St. Lucie, FL 13.15% 3.49% 9.65%Palm Coast, FL 12.95% 3.48% 9.47%Ocala, FL 12.93% 3.51% 9.42%Trenton-Ewing, NJ 12.93% 4.19% 8.74%Punta Gorda, FL 12.38% 3.60% 8.78%


Conventional Mortgage Rate

99 01 03 05 07 09 11 130.00%

3.00%

6.00%

9.00%


Net Home Mortgage Lending 2007 2008 2009 2010 2011 2013*

Depository Inst. 171.3 -151.2 -200.1 -99.1 -76.3 -89.7

GSE -9.7 8.8 -11.3 -117.3 -103.2 69.8

Agency/GSE Pools 622.6 492.2 402.5 175.8 148.0 95.0

ABS Issuers 34.6 -310.9 -319.7 -239.7 -192.9 -142.5Finance Co + REITS -88.9 -143.7 -69.5 -54.5 -20.5 -10.4

Other -15.6 -5.5 -2.3 -7.6 30.9 6.8

Total 714.3 -110.3 -200.4 -342.4 -214.0 -71.0


FHA Share of Financings

2001 2004 2007 2010 20130.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

US Orlando


Orlando: Financing Sources

1998 2001 2004 2007 2010 20130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

All Cash Conventional FHA/VA Other


Housing Starts

1998 2001 2004 2007 2010 20130.0

5.0

10.0

15.0

20.0

25.0

30.0

0.0

50.0

100.0

150.0

200.0

250.0

US (millions) Orlando (thousands) FL (thousands)


Housing Market Index

1998 2001 2004 2007 2010 20130

10

20

30

40

50

60

70

80


Household WealthBalance Sheet of Households & Nonprofit Organizations

(in $trillions) 2005 2009 3Q2013 Δ05-13Assets 71.7 73.1 90.9 26.8% Tangible 28.4 23.7 27.0 -4.9% Household Real Estate 22.1 16.9 19.0 -14.0% Financial 43.3 49.4 63.9 47.6% Deposits 6.2 8.1 9.3 50.0% Credit Market 3.4 5.6 5.5 61.8% Corporate Equities 8.0 7.5 12.1 51.3% Mutual Fund Shares 3.8 4.1 6.2 63.2% Businesses Owned 8.6 6.3 8.8 2.3% Pension Entitlements 11.4 15.2 19.1 67.5%Liabilities Home Mortgages 8.8 10.4 9.4 6.8% Consumer Credit 2.3 2.6 3.0 30.4%Net Worth 59.6 59.0 77.3 29.7%


Affordability Index (income/cost)

1998 2001 2004 2007 2010 20130

50

100

150

200

250

300

National Orlando


Consumer Confidence

98 01 04 07 10 130

20

40

60

80

100

120

140

160

Consumer Confidence Index


National Housing Survey

It is a good time to:

BUY SELL

Jan-10 64% 10%

Jan-11 68% 10%

Jan-12 71% 11%

Jan-13 69% 23%

Jan-14 65% 38%



Personal financial situation is

getting:

BETTER WORSE

Jan-10 44% 17%

Jan-11 44% 12%

Jan-12 44% 14%

Jan-13 43% 19%

Jan-14 44% 14%



The economy is on the:

RIGHT track WRONG track

Jan-10 31% 62%

Jan-11 34% 57%

Jan-12 30% 61%

Jan-13 39% 53%

Jan-14 39% 54%


Scorecard Level TrendPrices at/past peak levels - -Sales at peak levels in Orlando + +Financing low rates + ? "all cash" high - - lower FHA + +Foreclosures still high - +Builders starts - + views + +Demand consumer confidence - + affordability + - household wealth + +

Documents

Does Slow & Steady Win the Race? Residential Housing in 2014